Restructuring questions loom for P&G executives

Top Procter & Gamble Co executives can expect to be peppered with questions about an impending restructuring when they speak with investors at a major industry conference on Thursday.

P&G will fully leave the food business once it sells Pringles to Diamond Foods Inc later this year, and Chief Executive Bob McDonald has raised expectations for a restructuring announcement soon after.

We don't have it fully baked yet but we'll update you on that when we announce the closure of that deal, McDonald said during an August 5 conference call.

P&G usually restructures without the public taking much notice. It typically absorbs hundreds of millions of dollars in restructuring costs each year rather than spelling them out as one-time charges or unusual items.

But the pressure is on for the maker of Tide detergent to show what it is doing to improve in the face of ongoing sluggishness in its core markets such as the United States and Europe.

P&G already has some big changes in store. In addition to the Pringles sale, it is joining forces with Teva Pharmaceutical Industries Ltd to sell over-the-counter medicines.

Both of those moves provide the opportunity for P&G to take a closer look at its staffing levels.

McDonald and Chief Financial Officer Jon Moeller are set to speak at the Barclays Capital Back to School Consumer Conference in Boston on Thursday and interest in their plans is expected to be high.

Analysts repeatedly asked during last month's quarterly conference call about the possibility of a restructuring.

McDonald said then that P&G was thinking about a separate non-core charge this year. It took one when it sold Folgers to J M Smucker Co .

In fiscal 2009, the company took 9 cents per share in Folgers-related restructuring charges.

We're contemplating something similar on Pringles, McDonald said on the August 5 call.

Bernstein analyst Ali Dibadj raised his rating on P&G to outperform soon after that call because he felt that the company's management has realized that it needs to conduct a sizable restructuring.

For the past several years, P&G has taken internal charges of around $300 million to $400 million, said BMO Capital Markets analyst Connie Maneaty.

P&G could take a charge of around $1.5 billion that will save it $1 billion a year and cut its employee base by about 4,000, said Maneaty. Such a move could add 25 cents per share to earnings through 2013, although the company may only record about half of that 25 cent-per-share benefit, she said.

Last year, P&G spent about $250 million on restructuring, an amount McDonald called relatively low, as part of its ongoing effort to simplify operations.

Dibadj said a restructuring should be in the $2 billion to $5 billion range over the next several years to be even adequate and said he would be disappointed if the company set one that was not big enough or did not announce one at all.

Cincinnati-based P&G is also working on cutting its number of manufacturing platforms from more than 500 two years ago to about 150 by 2014. That move could be worth about $500 million in savings, McDonald told shareholders in his annual letter.